Health Affairs

Health Affairs, 25, no. 6 (2006): 1637-1647 doi: 10.1377/hlthaff.25.6.1637 © 2006 by Project HOPE	New Online   Getting Health Reform Done   After the State of the Union   Incremental Reform   E-Health in Developing World   Most-Read Articles in 2009

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Extensions Of Intellectual Property Rights And Delayed Adoption Of Generic Drugs: Effects On Medicaid Spending

Aaron S. Kesselheim, Michael A. Fischer and Jerry Avorn

Rising prescription drug costs present a critical policy issue for Medicaid. Generic substitution can reduce costs, but the effects are undercut by extensions of intellectual property (IP) protection, elevated generic prices, and low substitution rates. Using Medicaid prescription data for amoxicillin/clavulanate, metformin, and omeprazole, we calculated the savings that could have been realized if generic drugs had been available and fully substituted at their lowest cost when IP protection first expired (an average delay of twenty-six months). The delay in availability, elevated prices, and slow uptake of generic alternatives for these three drugs alone cost Medicaid $1.5 billion in 2000–2004.

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